2022年6月5日 星期日

 Part 9, Advanced Civil Construction, 台科大高等土木施工學教材(2022) 

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/)

4. Overseas Construction Project

1) Historical Review (in Stages)

(1) Stag 1: Free Movement of Construction Resources between the Borders

Lack or insufficiency of construction resources in terms of material, working capital, and technologies prompted the host countries to accept foreign construction companies to come to their turf when they want to build economies from scratch.

It’s time when machine were expensive, native workers available in number, local engineers to be trained, but the surrounding infrastructure to support the construction activities of the referred project were poor.

The recipient countries needed to implement the projects but they were also obliged to nurture their own construction forces for long term purpose. Therefore, they called for international tenders asking more experienced and resourceful foreign contractors to be the main signing party, and demanded they to form partnership with local contractors.

Though the contractors from developed economies might complain that the local partner weren’t necessary; in general, as a stranger, they really need good guides helping them to recruit native workers, obtain local material, and solving all kind of problems in a culture that sometimes they feel weird and helpless. 
The local partners would act as sleeping partners or agents at the time when their ability to handle construction works was limited. But as it went by, they would grow in size and strength to advance their scope of undertaking. Their ascending, in certain extent parallel with the economy development of the host countries, was almost for sure so the international firms should have accepted the result and adjusted their approaches. 

In view of the changing market in favor of the local construction firms, the governments would have to amend the relevant laws so the flow of machine, man and resources would be subjected to regulation. 

Always the new discretion would ask the foreigners to undertake minor part of the business which the locals still need assistance; or only to provide expertise through “Technical Cooperation” arrangement rendering plans, drawing and hand-on instruction. 

After all, the governments holding the budget and power to build the project should have final say to decide who he wanted to deal with. And for civil engineering, it has never been too difficult for people started from nothing; and besides the local people know better than the foreigners to navigate through the local bureaucracy. So, unless it is a loan requirement, the authorities certainly would prefer the locals to be the contractors.

(2) Stage 2: Work Hard vs Work Smart

Thanks to the rising human cost and the diminishing technology edges, construction and engineering firms from developed economies is gradually replaced by the fledging third world contractors, especially those from newly industrialized country. 

For example, the use of construction machines and plants long considered the monopoly of the westerners for magic efficiency and exactness is overtaken by the skilled labors of the contractors from the Newly Industrialized Countries (NIC) with even better dexterity. The NIC contractors are eager to go to overseas countries for projects that only yesterday the Westerners would be yelling yes and no for their technical and management supremacy. 

The landmark change is possible as that the NIC contractors have many projects in hands for practice from planning, design till construction; and it means they’ve venues and opportunities to train engineers, skill labors and commercial staff for years to satisfy generational infrastructure demand of an economy.
It’s almost certain that the NIC contractors would always out beat the westerners in international competition as price and schedule were talked about. But the existing order are established by firms of yesterday and the share of added value for the new winners would have become less while the risk is unproportionally incurred to them. 

The reason is that the international contracts now are no more centered on pure construction. And in the name to make the investment more secure, a construction contract now require participation of those non engineers: notaries, law firms, inspectors, laboratories, certifiers, appraisers, unions, arbitrators etc. The absolute figure of fees paid to them is not significant in total contract price but still enjoyable compared to the meager overhead allowed for the hard-working general contractor; most of them now from NIC. 

We understand conditions and specification are drawn by contract experts from developed economies, language, proceeding and supporting document required by the same culture. 

When western general contractors quit substantial construction, they continue to create contractual requirement asking the contractors undertaken to observe. The capital, with regards to its security, is respected so that the clients all over the world eagerly followed as they come in the form such as "norm", "standard", and "proof", despite it further complicate the works. 
Now, there will be added values shared by those provide certificate, test report, or litigation documents which the Asians may need more time to apportion. It’s not to say that the values generated by technology, craftsmanship and labors for construction projects become less important. 

But it’s conceivable that working hard as the only way to thwart competitors from the developed economies isn't sensible. The industry evolved, but not everything can be repeating.

(3) Stage 3: Investment Security Trump Everything and in Favor of the Establishment

The trend for construction works in 21st century is many of the gigantic projects will be invested by private entities as schemes like BOT or BT continuously churned out from governments because their coffer seems drained out. Money is everywhere but the mammon doesn’t like to face uncertainty; so, the professionals now including commercial experts are flattered to present risk free schemes to woo investors. 

The security of capital and return of vowed profit will trump anything else. 

As a result, the concerned parties have to pay attention in project phases starting from planning, design, construction, O & M, and until the marketing of the product.

Construction cost is important judged from the big number It used to be, but its
share in total price become lower as non-engineering cost rises in weight. 

Then, the guarantees for work completion is everything, the evolution continues, that the real builder may not be the one awarded the contracts just having the records completing the similar projects, or financial capacity to indemnify the parties nominally.

Public or private clients, when they want to initiate the idea or start the actual construction, justification as to determine who is the partner is important because the decision maker needs to be answerable to say they’re awarding to a reputable company for planning or construction when questioned by stakeholders.

Nowadays there won’t be many conventional “build according drawing” construction contracts among international tenders, the contractors from advanced economies adapt very quickly that they go beyond traditionally a pure construction company 
owning construction resource themselves. 

They have many choices to sub-let part or whole construction works to single or several constructors who maybe local, or a self-regarded higher tier contractor from the other overseas country. He may exercise control and deliver the work effectively similar to what Nike or Adidas have done over jerseys and shoes. 

Under the so-called global market, free flow of man, money, machine, and material is encouraged; and it seems fair. But the problem is now the companies in less developed economies will provide labor and for actual construction but only share limited added values compared with those set up the standard, specification, giving checks and certificates, maintain the margin and profit, but seldom bear the risk.

The 20th century capitalists in construction industry own enormous construction fleet, fostered engineering capability, put up contractual and legal frame and monopolized banking system. With their cultural and political advantages, they commanded the business for long time. 

But when those used to work under the international big firms considered themselves a good learner to join the ranks; the 21st century capitalists evolve that they now concentrate to secure capital and return through "possession", "exchange" and “added value”, engaged deeply in the investment themselves so as to cast off most of the late comers.

2) Distribution of Added Value under the New Market Order

(1) "Labor" was most important element in a producing system, no exception in construction industry, for which, the machine was supposed to replace lot of human efforts in works. But the Engineering professionals are vital in construction works to decide the performance of labor and machines and thus the surplus value; to certain extent the engineer is the "establishment".

But under the modern-day project management system, bankers, notaries, law firms, inspectors, laboratories, certifiers, appraisers, unions, arbitrators and those who will assure the project successful can hold positions and charge their cost relatively easy. It's no choice because the moneymen need their endorsement and ask them to play the dominating roles while the actual doers reduced to their subordinate.

(2) The redistribution of added values between technical and commercial professionals is possible because renowned international banks or institutions will seek opportunity to get involved in construction projects for possibility to offer financing arrangement. The governments around the world, the ventures collecting toll or making profit from franchise always welcomes loans and risk sharing proposal. 

The "establishment", normally construction companies in western countries, are known to and more trusted by the banks or investment funds, so they can reach agreement with each other forming ventures for the projects.

The banks or investment funds may always prescribe, and it's not difficult for the western establishment to respond, that they will add specifications, standards, and contract terms familiar with into construction plans; inadvertently strengthen their positions in the projects, which, many NIC companies will feel not accustomed, and are actually excluded from competition.

Though, the contractors from "South Countries" will be assigned to do the real work but only under the established contractors from the "North Countries". It's a crucial fact that the overhead and profit obtained from the drudgery work is limited and the risk tremendous. Hopefully, after long time and many contracts that the best of NIC contractors going abroad can be improved more than getting mere survival.

3) Chances for Taiwanese Construction Industry to go for Overseas Market

(1)   Compete with Locals over Efficiency versus Providing Loan and Capital 

Possibility exists that a NIC contractor like the one from Taiwan may be able to join the club of international contractors offering conditions allow them to share high added value in overseas projects, however, they have to bring loans at least for their part and still they need assistance from established company or face more uncertainty throughout the process. 

Usually the loans offered for foreign construction projects must be earmarked with the commitment from the local government to guarantee return of the loans; this tends to be difficult when diplomatic relationship not existed between the governments. 

Should Taiwanese contractors or engineering firms not able to offer loans working as the subcontractors of international joint ventures, they need to prove they will be able to save money, keep quality and progress for main contractors. And it means they have to contend with other NIC contractors or even the local ones for playing secondary role.

(2)   Contribution of better Construction Technology under Sublet System


It must be admitted that to play the role of constructors in strange country, Taiwanese company cannot be as efficient as the natives to organize local labor force or purchase cheap material. Money is also something that the contractors from developing economics no more feel they are short of.


Taiwanese contractors may be slightly better off in competition with locals, for their technology and experience in certain projects are good, but it's diminishing.


The sub-contracting system in Taiwanese construction industry is a problem that the resources are thinly distributed among many sub-contractors and leasers. Market is highly fragmented that the main-contractors owns no resource except limited number of engineers, and when they need to work abroad, they don't have anything to move out: professionals or skill labors, forgetting about permits and licenses required to work in alien land.


(3)   Possibility to undertake Planning and Design Service


   So, it seems like that only consulting companies can go to take meager amount of overseas design contract as much of planning and design works can be done remotely in Taiwan.


Of course, the engineering works done must conform with standards and norms such as BS, DIN, or JIS wanted by main contractors and not CNS or American codes usually followed in Taiwan.


Supervision will be challenge because the owner or international main contractor wouldn't pay as much of Taiwanese expatriate will cost. It requires a competent local partner to reduce the cost.


The purpose to work in overseas countries shall be reviewed. Will the business be expanded to cover foreign countries allowed for, profits overhead or service charge as required? Or will it increase the sales of home country made product, construction plants or permanent equipment indirectly?


The calculation is simple and only to become meaningful when business amount is significant.

4) Adjustment Imperative for Company System and Policy

(1) Consideration shall be given to the overseas allowance, vocation, compensation for tax incurred in foreign country, care of spouse and education of children for the expatriate sent to foreign land in addition to their regular salary and bonus in home country.

(2) People sent to foreign land will face challenges and can very likely be working in desolated situation; and only elite of each discipline shall be assigned to solve the problems.

However, two issues always appear in a company undertaking overseas works: 1. sectionalism exists in the concerned departments, chiefs tend to send less qualified people;  2. After distinguished performance in overseas projects, many expatriates coming back home only to find out "good" positions having been occupied by people of inferred capability.

There must be a fair policy and under it a mature personnel management system covering domestic and overseas projects. The chief of department must be a stakeholder for success or failure of the projects the company undertaken.

(3) The sale amount for overseas projects may be meager compared to other company revenue, but efforts to take for operation in different country, such as accounting, tax report, currency exchange, law and rules abiding, local standards and codes compliance, contractual administration, procurement, and financing arrangement have to be tremendous in headquarter. 

Usually in the Company the decision maker is reluctant to pay un-proportional attention to the meager sales amount in single different country to support the overseas construction activities.

Also, the branch or project managers of overseas contracts may not have the knowledge or authority to recruit right and sufficient local assistance. Unavoidable the suffering becomes deplorable at last; dragging down the momentum to pursue the overseas business.

(4) The exploration and subsequent operation of overseas construction market call for the company to provide money, know-how, credited work experience and ready to deploy talented people for whatever the projects undertaken; but ironically big company and their follow managers only to think of overseas business at times when they feel jobs in hands aren't enough.

It takes time to obtain a contract, and the resources shall be paid out at any moment. Therefore, the company to develop overseas work shall be big enough to dedicate for what they will have in hands given the short mobilization time. People have to realize the contracting business will not come only to fit your schedule.

The construction companies in Taiwan long suffered from overdue subcontracting system and resulted market fragmentation. The cruel fact is they don't have sufficient resource to go foreign land. 

Sometimes only sole determination of the strategy makers of a company to go for abroad could be tragic.

5) Assignment of Right People to Run Overseas Works

(1) In different countries, traditions, work conditions, and market competition are not the same; so people to be assigned for business can be unique. In general, personality of a representative is more important than his education; cultural adaptability than language, and impulsive energy than professional experience. 

There're political and diplomatic handicap Taiwanese people working overseas will have had; and under the circumstance maybe people of special trait will be able to do something unusual to overcome the difficult. 

(2) It takes time to get the jobs, especially the good ones. Patience shall be used to evaluate the performance of people responsible for business. For example, the annual scoring plan shall not be used as excuse for those overseas representatives to sign bad contracts to meet target contract amount allocated to them.

For the same consideration that the people in headquarter shall not be hasten to recall representative(s) from foreign branches or delete them after not getting contracts of satisfactory amount.

6) Conceptual Readiness for Construction Companies to undertake Overseas Business

(1) Before going for specific project, the Company must make sure it will have people experienced enough to go for the project; or it will have fair chances to recruit qualified people from the industry.

(2) The company management shall be knowledgeable for overseas projects operation; and is willing and passionate to develop business prospect in foreign lands. It is better that the decision makers will have overseas experiences themselves.

(3) The company employees realize the need to develop overseas business as only means to extend market and enhance technology; and the people are willing to adjust themselves to reinforce expertise, learn foreign language and change work attitude for overseas projects.  

They understand any domestically market protection is temporary, and only the industry essentially strong and internationalized, are their life long professional guarantees.

(4) For operation in strange country, the company management mentality shall be open. But it's easy saying than doing; the feeling of superiority toward the locals are hard to fend off and remains qualm of Taiwanese management. 

Anyway, an idealistic team shall be consisting of agent, sponsors and partners through the intimate cooperation of local employees.

A capable and trustworthy agent or sponsor will obtain in time information, establish the links with authority, and acquire competitive local resource for the Company. Above all, they shouldn't sacrifice the Company for slim benefit to continue the agent ship for minimal commissions.

In almost all the countries, the implementation of the projects, engineering or construction, require minimum participation of the local partner(s); a good one will offer the assistance to reduce the cost, solve licensing and authoritative problems, and truly to share the financial overburdens resulted from the unbalanced payment schedule.

The employment of locals, especially, in the branch office for business pursuance and project supporting is vital; the salary and promotion must be better than local market practice to ensure loyalty and reliability of the natives.

As people from Taiwan in strict sense will only work as passerby ultimately, trust and confidence must be rendered to the locals as they're there may be forever. Even slight discrimination will be incubated and turn out to become source of disloyalty and misconducted behavior in the future.

And for a system that must be built on fraternity and egalitarianism, the decision makers in far-flung headquarter must have responsibility too.

7) License, Registration, Special Permit for Foreign Contractor.

(1) Ownership on land, housing and factory.

(2) Permit business operation to sign the contract

(3) Permit to import the machine, permanent equipment and material

(4) Free to hire local engineers of required qualification and numbers

8) Acknowledge of difference and handicaps:

(1) Handicap in language.

(2) Difference in cultural perception.

(3) Difference in applicable code and standard.

(4) Difference in executing safety and environmental protection rule

(5) Difference in Tax code application and interpretation.

(6) Difference in labor management.

(7) Hindrance or inconvenience caused by entry visa and work permits for expatriates.

9) Unmanageable Risks:

(1) Politic risks (regime change, war, commotion, nationalization, sanctions,    embargo)

(2) Exchange and currency risks

(3) Economic risks (inflation, interference in manufacture and transportation system)

(4) Natural disasters (flood, typhoon, earthquakes, avalanches)

(5) Legal risks (change of law, unpredictable adjudication)

(6) Cultural Risks-incoherent mental and behavioral model between host country people and foreign contractor.

10) Manageable Risks (with care and monetary provision):

(1) Construction schedule and completion date.

(2) In time delivery of construction material and equipment both in quality and quantity.

(3) Contractual risks

(4) Safety and security of expatriates (persons, property, accidents).

(5) Free flow of capital.

2022年5月22日 星期日

 Part 8, Advanced Civil Construction, 台科大高等土木施工學教材(2022) 

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/)

2)  Machine:

(1) Prototype, bespoke; portable, fixed.

a. Machine, prototype

People in construction industry need to know machine, plant and equipment for their manipulation, size, cost, productivity and supplies required. 

The general contractors used to own machines, in the days they're expensive relative to human cost.

When a country starts to build infrastructures, they need to move earth, lift heavy weight, paving concrete and asphalt, and confront with water or other inaccessible.

There're machines typical to do these jobs and we call them the prototypes: bulldozers, cranes, graders, trucks, mixing plants, paving machines, compactors, working boats etc. 

The works are many in fledging economies, so the machines are welcome for repeating usages in seemingly endless construction. They’re powerful to replace manpower and quick to deliver the landmark projects. 

So when machines with international brands such as Caterpillar and Komatzu appear at construction sites, they symbolize the government’s commitment to the economic growth.

b. Machine, bespoke

As countries proceed to build infrastructures projects of more sophisticated nature, the machines and the method employed may need special design and fabrication, we called the order and the makes bespoken. The usages are limited unless market is big and construction is in succeeding, but it will finish the works for that human won’t be accessible or to do. The most obvious one is tunnel boring machine of different diameters and shapes at restrained spaces. 

c. Machine, fixed type, mobilization and assembling cost

Most of machines can be transported to construction sites, either by self-driving or mounting on trailer for long distance, we call them portable, such as dump trucks, excavators, dozers, loaders, etc. For mixing plants, TBM, tower crane, or machines too big for transportation, they're divided in parts or compartments, and then hauled to the site for erection; we call them fixed type of machine.

Engineers must take into consideration the cost and time required to mobilize, install and demobilize construction machine. Sometimes in the remote area or hazardous places disembarkation and the installation of plants and equipment can be difficult and costly that the engineers have to think about the solution. The damages possibly incurred to the parts or entire plants during transportation shall be foreseen and at least insured against accidents. 

Also, people need to know the value of certain fixed plants decimated very much in single usage, and the remaining value after one project could be only the material cost after dissection.


(2) Operation, maintenance and repair.

a. Owning Cost: Depreciation, Interest, Productivity

In the days when the value of machine and spare parts far exceeded cost of people serving them: operators and crew for maintenance and repair. Only companies big enough would buy machines as main asset and source of revenue. 

For two historical reasons the machine ownership had to be overtaken by specialty companies: 1. Facing rising human cost and fastidious labor and safety laws, only companies able to concentrate effort to manage problems related to operation, maintenance and repair are in a position to handle the machines. 2. Company owning big fleet of machine wouldn’t have chances to share costs with other companies through rental arrangement.

The machine owning cost shall be calculated as buying price plus interest payment over the machine's service life. One is called flat depreciation method, use the buying price divided by estimated remaining service life; the other is weighted depreciation method, assuming the first 2 or 3 years the machine will have high productivity and place the cost depreciated certain fraction more in such 2 or 3 years. 

However, the taxation offices legally also have power to decide amount permitted for depreciation for different equipment. It affects how the owners should have decided on to charge their equipment.

Interest payment can be considered for each company outside of the machine cost calculation.


b. Maintenance and Repair Cost

Machines need operators to move them, the owners must pay to the operators the hourly wage and overtime. And machines also need daily, or periodical maintenance; the related cost are the wages of the workers responsible for maintenance and amounts covering for consumable, lubricant and tool. 

Repair cost in general is low when machine is new, but it will be accelerated when machine's condition become less fair in later part of work life. The elements of repair cost consist of mainly two parts; one is labor, and the other will be that of spare parts. In developed economy, the repair cost shall be between 100% and 200% of the initial cost according to statistic, depending on different equipment. 

In developing countries where machine price is high compared to human cost, the wage of operator can be 4-5 times of that of manual labor and output of machines will be higher than what can be achieved in advanced economy. Because when machine is expensive, the owners don’t care to give higher payment to operators, which can be easily covered by revenues from higher machine productivity.


(3) Rental and owning.

Started from 70's last century, general contractors ceased to own construction machine themselves in consideration of big investment over uncertain business opportunity, difficulties to handle labor relationship with operators, maintenance and repair workers, and judgement based on specialty knowledge over replacement or repair of major parts.

The bosses of equipment rental companies always start to acquire construction machines with blessing from big construction companies guarantee the continuity of the works. It's important in Asian countries that this kind of company were operator com maintenance workers, being able to keep equipment and trucks in good conditions with their entrepreneurship.

Furthermore, they may work with their supra contractor on quantity and rate. The arrangement is costly efficient but not assured schedule wise especially massive amount of mechanic works to proceed.

It is proven that the general contractors have no way to replace the small owner for construction machine maneuver involving operation/ maintenance/repair. Nowadays the rental rates can be as high as that 2 years charges may be equal to the buying price of a plant.


(4) Construction method and machine selected.

a. Selection of Work Method and Construction Machines.

Designing an efficient construction method is key to successful deliver of infrastructure works: right construction sequence, get through most critical part of work, minimize undue outside interference, and avoid hazardous incident from happening shall be considered when the plan is drawn.

Engineers may have wide range to select machines for construction method; however, it will be influenced by the market availability for machine itself and operators, for example, in Taiwan excavators are everywhere but dozers and loaders not frequently to see contrary to North America.


The reasons could be incidental that maybe the ones first introduce them to Taiwan prefer them and others just followed, or the operators are dexterous to maneuver the machines in congest excavation site in Taiwan.

Market size and available replacement could play a part, the use of tower crane was another example, because the maintenance and mobilization cost shared by small number become significant and mobile crane can be substitute, so the tower cranes are not so many in the island.

In Taiwan, selection of machine once accepted by the officials, budgeting and supervision for that particular item will be almost fixed in public works. 

Changes to another machine or method will have to be accommodated to the bureaucracy; adding another point that people and work gangs aren’t so innovative to create new construction plans. Another proof that civil contracts is local and conventional.


b. Machine and Manual Labor

In countries like India, machines face strong competition from man power; Bulldozers and earth moving machine are levied with high import duty and surcharges, that men and their assistant with hoes and dustpan will have chances to outperform construction method based mainly on mechanization as cost is concerned.

When owning a machine become expensive, the efficiency will decide its survivability.

So, in the case of India construction market, the wages pay to the machine operators won’t be significant compare to the revenue generated by extra output brought by the operator’s better performance. Thus, the wages of operators can be 5 times of the common labors in developing economies.


c. Cost factors in Prototype and Bespoken Machines

There is situation that prototype machines will not meet construction requirement, the bespoken one will be the solution. 

But engineers need to know: 1. Lead time to design and build the plant is long; they’re not available at once like ordinary plants on the market. 2. When one part goes down, entire system will idle or fail. 3. Though people will try to re-use it for next project but the chance is slim. 4. The whole value of the bespoken plant can be high and when it scraps after one project, the depreciation allowed can hardly be claimed. 5. Turnkey contracts become popular these days; the contractors will have chances to design structure sections optimal and fit into owned bespoken equipment.


3)  Material

(1) Local and Conventional Material shall be chosen for Construction.

a. Transportation Cost and Locally Available Material 

Material for construction is bulky and transportation cost is high, so they have to be obtained from local for maximum extent as quality and property may not differ so much from the outside world. 

Attention shall be drawn to the fact that sometimes the overwhelmed material requirement of a gigantic project may tilt the supply/demand balance drastically in an isolated area. Investment in term of time and money shall be considered before projects start to assure a quality and punctual completion. 

However, material prices can be fluctuated from time to time either in the case of limited supply, such as aggregate and sand, or as a result of global boom like steel and rebar. It can be deadly to an ignorant contractor, that the risk can only be addressed through contracts with so called escalation clause giving minimum protection for the builders.  

Because the projects are there for economic development so that the employment of local artisans and labors shall be considered as early as in the design stage. 

Engineers must think about the possibility to use traditional technique involving local people and product even to the point to edit the specification to show respect to the tradition. For example, the Baku piles were used in Southeast Asia for soil retaining and promote compaction effect in embankment, it has been used in international class projects for its convenience to install.


b. Continuous Evolution for Material used in Construction

In old days, human's weight lifting capacity was limited, long distance hauling capability also prohibitively expensive and could only go through waterway. People had to use small and light material from local, like timer, brick and mortars for buildings and structures in most of the cases. 

Granite and basalt were used in part of Europe especially for churches, castles or monumental structures. Wooden structure was erected in Asia for aristocrats and land lord, but the timber size reduced as a result of deforestation. 

In general, the masses had to live in hut and dens for which they built with any material they could pick up from nearby area. 

Discovery and use of steel in civil engineering works change the world. They replace traditional construction material resulting in great cost and time saving. Steel in the form of rebar, sections and strains give buildings and structure new dimensions and spatial aesthetics. 

People still think of innovation for construction material better than steel, such as fiber glass or high strength concrete, commercially one day it would be popular as steel used today.

Mankind are smart to utilize everything from nature but sometimes it can be tragic. For instance, there’re countries like Bangladesh where hard stones and sand difficult to obtain. So, the local people extract and burn clay from alluvium into brick like material. Then women and children will use hammers to break them into sizes of and utilize them as aggregates and sand. Then they mix them with cement to obtain concrete. 

The solution risks human life because buildings and bridges sometimes collapse for the weak strength those improvised materials provided. It's wrong type of localization; poverty force people to continue the practice.


c. Green Construction

Nowadays, carbon reduction is an issue, the material used in the projects shall be considered climate friendly, and engineers need green knowledge to incorporate construction material made from renewable, waste or need less processing.

Commercial calculation won’t be the only consideration.


(2). Material and Equipment incorporated into Permanent Project

a. Project More Sophisticated 

As economy advances in a country, the construction work won't be simple structural work again; many systems and equipment will be installed in addition to steel and concrete. So, procurement will be more complicated than simply clearing the composition, dimension and strength of construction material. 

When proper delivery of system and equipment, and their installation, operation and maintenance, is desired; prior check and mutual commitment shall be made with reliable makers or specialty contractors even before the contract is awarded.

An experienced general contractor knowing the risk implied in the contract signed with ever demanding client will seek teammates working in different field to discharge the huge responsibility for successful delivery. The cooperation may include consortium, main and sub-tier contractual relationship, or various form of partnership suitable in each case since before the tender. 

b. Nominated Subcontractor

In practice the owner may actually designate the maker of the system and equipment based on confidence and trust the brand bearers have exhibited. After award the winning contractor has to sign the sub or supply contract with the specified makers at least to overtake the partial responsibility of delivery, which always include risks begin with engineering, then making, shipment, installation, commissioning, test run and until operation. 

In other words, the signing parties has to share whatever may have happened with the owner: strike, sabotage, mistakes, bad performance, act of god, all kind of disruption that may occur.

However, during budget establishment, there will be bureaucrats, design consultant, auditors and financing people reject the idea that the contractors need overhead to handle the nominated subcontract. They consider the frontage contractor won't add substantially anything and the following up the delivery is their obligation.

The denying of invisible cost stemmed from the days the economic output mainly counted on agriculture and manufacturing (Physiocracy). The ignorance causes big problem in pushing the works forward; and a further proof that the construction works sometimes need cultural and conceptual fix.


4)  Money

(1) Payment: cash, in kinds or goods (barter), deferred (BT), franchise revenue (BOT, PMI).

Men work for money, only after the contractor can get full payment the completion of the project is meaningful to him.


Only after the contractor can get full payment, the completion of the project is meaningful to him.


And because the construction contracts are with big money, public or private owners will choose forms of payment according to their financial conditions. The contractors will be paid in cash, kinds or goods (barter), deferred payment after completion and transfer to the owner (BT), or through franchise revenue (BOT, PMI).


It also possible that the form of payment can be mixed between the above-mentioned methods. The contractor must evaluate its own ability to accept the form of payment, for example, when he would have accepted the payment in crude oil over long period, he has to evaluate the possible oil price fluctuation and the extent and cost that he would have been protected by the futures.


The reliability of the owners, government or private companies must be taken into account.


(2) Standard international contracts to regulate: FIDIC, NEC3 (New Engineering Contract3), AIA(American Institute of Architects), JCT forms of Contract(Joint Contract Tribunal)...etc.

It's not enough that the contractor will get the owner's pledge to pay him. It depends on the contract conditions through which the contractors get paid. Normally we'd have type of contracts such as: FIDIC, NEC3(New Engineering Contract3, used for civil works in UK., Australia, New Zealand and Hong Kong, the language of it is simpler and the signing parties are said to be more equal), AIA(American Institute of Architects, form of contract popular in USA.), JCT forms of Contract(Joint Contract Tribunal, for architectural works in UK.)...etc.

As projects are different for each other, the contracts need to be modified to fit the situation; they will be reflected in so called Special Application (or Conditions) and leave the General Application (or Conditions) unscratched. Whatever slight difference in Special Application will result in big departure in reality so that the contractor needs to read carefully even the author of standard contract or the Owner would have claimed they're the friendliest contract terms.

According to the payment conditions, the contract can be divided in forms like the conventional Rates and Quantity, Lump Sum, Guaranteed Maximum Price, Alliance, Cost and Cost Based, etc.

契約形式甚多在台灣有政府範本、國際人士許多引用FIDIC,,英國協土木工程多採用NEC3,建築則有JCT範本,美國人則用建築學會之AIA。另依付款形式則有Rates and Quantity, Lump Sum, Guaranteed Maximum Price, Alliance, Cost and Cost Based等。

(3) Non-technical People to Control Money.

Compared to the old days now that big component of contractual money pays for intangible part of the project in the name to protect every party involved. The added value including the cost to acquire money, assure the delivery of the works, O&M of the project and even to the extent to guarantee the products or the purposed functioning of the project will be welcome by the customers. Thus, the added values are created.

But it is true that engineers are not playing the dominating roles in construction business because the invention as said is from improvement of technology, business skill, capital fluidity, that financial, legal and management people intrude and colonize uncompromisingly.

Though money is everywhere (QE?), but they get more respected. The so-called experts like to invent ideas to attract the capital, they provide guarantees, mitigations and assurance to fascinate investors. Under the trend, lots of the construction projects are controlled by hordes of non-technical people who can confuse the investors. 

For example, the government has plain financial resource for construction project and spent almost exclusively for construction related items last century. But now, big chunk of them will be paid as financial cost for BOT and/or PMI as people argue private fund is useful to create more public works for the benefit of the people.

A decent part of money will go to the so called independent third parties for their certificates, report and affidavits at non bargain-able cost (handled by the non-technical people) for the security of capital while the construction hands need to compete each other.

Engineers must realize, somehow, they’re now playing secondary role in the construction project; but because of it they could concentrate in technical matters and become a better manager than people of other disciplines invading the profession. 


5) Market 

(1). Contractors of Lemming Mentality

As it's said above, there're 2,800 strong Class "A" contractors in Taiwan to apportion a small market; the threshold to go into the construction market isn't high as capital (relatively low to the contract amount) is concerned. When they get contracts, the contractors will find many sub-tier contractors more than eager to share risks and sometimes loss.


The running cost for a Class "A" contractor is low in Taiwan, the expense will be fee paid to the registered PE, a tiny office, plus a clerk to answer the bell. When the bosses cannot get business, pay such the low cost for "hibernation", will allow them hanging on for long.


The sleeping contractors will wake up when they get contracts and then to recruit managers and engineers to activate the company. Taiwanese people aren’t against shoot and off employment as most of them like to stay in the area like big city or home town.


So, the majority of the contractors are "entrepreneur" type. They're competitive and spiral down ward the awarding price. The practice is not possible to nurture big contractors with know-hows and experience in the market.


But once it is provoked by market turmoil destined to happen every few years, such as sudden sabotage of dump trucks of 1990 (resulted in soil haulage hike and aggregate short supply), or sharp escalation of steel price in 2006, the contractors wouldn’t have sufficient contingency provision will go for broke. The number culled will be significant but it will rise again if there is market re-juvenescence.


The process repeats again and again; the contractors go up and down riding on the changing tides. The one with bad luck can capsize, but too many of them survive. One moment, the contractors' number will be swelling like lemmings grow to incredible number in short spring time; the other moment the nature will drive some of them jumping the cliff and the rest follow subconsciously.


The market is still there for another cycle; but the professionals wouldn't have chance to lead the trend while public has to bear most of the cost that speculators should have to pay.


(2) Style of Competition: Lowest Bid, Evaluated Lowest Bid, Value for Money.

The problem of construction industry in Taiwan is over competition. Lowest bid is blamed because under the bureaucratic system the budgets were considered to be right and served as bench mark for the contractors. The winning price was considered as true market cost or the officials follow them shall be subject to official chastisement.


Automatically, people, the budget builders or the tenderers will consider it as a bench mark for similar tenders. Vicious cycle begins and the awarded prices have to wait for another episode close to force majeure for correction; of course, it's always late.


Evaluated lowest bid is taken with the hope that the best contractor and their offer can be selected as the champion to win the tender; however, the selected may not be the most outstanding one, and the judges' supposed imparity is often challenged.


Authorities had sometimes to amend the criteria with the aim that it must be more fitful for particular tender but more susceptible to criticism. So, the evaluated lowest bid system stopped at 2007 in Taiwan, and BOT and PMI also suspended. The lowest bid tendering system prevailed for the next decade.


It is true that in recent years the contractors don't make money. They kept tendering and performed the contracts only to sustain the company. They couldn’t afford to pay senior engineers because of the poor overhead earned; the result is the loss of expertise.


There will be limit to which the contractors take the construction contracts because they can’t make profit after all. The result is tenders "aborted" or the execution in chaos. So, the evaluated lowest bid is coming back. There’s possibility and also a reasonable hope that the authority may get lessons from flaws happened in the past.


The criteria to select the best tenderer for the tender shall be rationalized, especially that the persons to be assigned as "judges“, shall be men of integrity.


Current tendering rules propping the idea for EPC will nurture bigger and more public construction companies instead of the small entrepreneurs who always cut corners of the fair competition is said to be the solution to correct the market for persistent fragmentation.


It could be a well wish and hind sight, but seeing the implementation of FCPA (of the US) and similar laws of various states, the big and public companies can be supervised more thoroughly in the entire process.  


The final goal for government spending shall be "Value for Money", in which, the project completed will worth money spent. It’s idealistic but we suppose the introduction of more liberal ideas, moderate as it may be, will bring in the progress.


(3) Elements of Competition.

 market considered normal will be the one that the consumer is most important. For public works the government is single biggest buyer, he can draw the lines to select the contractors based on their apparent capability, past experience and planned execution plan for the tendered project.

It means the government can define a clear and objective criterion for elements such as price, technical approaches, time of completion, safety record, experience in similar works, existing work loading, managerial and technical resource in hands, records of contract disputes (with owners) …etc.
For international tenders, the owners usually will analyze and evaluate the tenders according to the criteria established objectively. The scores and the tabulation can then be submitted to higher ranking people, maybe people with reputation for review.
The process will avoid complain that the judgement in supporting contract award is made subjectively so as to prevent the outside criticism and interference.
It's true that during the selection of the winning contractor, the authority and invited judges have to "play god" to weed up the weaker or the unfit, and the result maybe that the selected aren’t the perfect ones because many factors are involved during tender period and later execution. Especially in Taiwan, public and the industry may not be patient and those who shall be responsible are always susceptible to flak.
However, the rules shall be respected and endured some time to see what if it will change the construction industry players and whether or not that the professionals will be allowed to lead the ring.


(4) Defying the International Norms.

Until now, the developed countries especially Europeans and Americans have big say on the codes, standards, disputes solutions and financial arrangement of the international projects. They are the establishment to enjoy privileges and power more than their competency in the industry.


If the Asian contractors want to go overseas or their owners ask them to copy the western practice for execution of the project domestically, they may have the problems to follow specifications and conditions strange to them.


They won’t have sufficient chances or clout to interpret the contract even try to show they’re familiar with the project and have confidence to complete them as required by the owner following the western philosophy to guarantee the success.


Despite they have good engineering knowledge, construction skill and the ability to do the works substantially, they suffer considerable losses in the construction market, international or a transplantation from foreign by a client insist to do so.


We believe it's not an intended design promoted by certain races or cultures but it’s difficult, if not impossible, to change the established practice immediately. Because there is humanity element in the capitalist system, that the distrustfulness is used everywhere in the administration of construction contract in the name to safeguard the people’s interest that the concerned parties have to accept.


There could be solutions, one is forceful and intransigent, complete "westernization" like the South Koreans indisputably good in construction of high rise building and complicated plant.


The other is to change the game rules as Chinese have approached in their Belt and Road Initiatives: loan, specification, contract terms, O&M, arbitration, success or failure, remain to be seen.


People have to recognize that many of our practice in construction business, is originally very local, but add up with many western flavors when economy grows. That now we think it’s universal, then you modify them, or they change you.



2022年5月11日 星期三


Part 7, Advanced Civil Construction, 台科大高等土木施工學教材(2022)

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/)



1.         Resource Required for Project Implementation 

1)        Man 

a.     Power to drive Individuals and Organizations to achieve Business Goal: 

--Nature of Power 

Man loves power, unlike animal’s content with existence and reproduction; human desires are essentially boundless and incapable of complete satisfaction.

A large proportion of the human race is obliged to work so hard in obtaining necessaries that little energy is left over for other purposes; but those whose livelihood is assured do not cease to be active, they look to power and glory. So young people start to drift in the world will wonder why the needs of obtaining the two become imperative for those have something. 

The easiest way to obtain glory is to obtain power; this is especially the case as regards the men who are active in relation to public events. The desire for glory, prompts the same actions by the desire for power, and the two motives may be regarded as one. 

Power exhibits in many forms, such as wealth, civil authority, and influence on opinion. No one of these can be regarded as subordinate to any other, and there is no one form from which the others are derivative. 



Among the phenomena featuring construction industry, "Man" is most relevant.  Because people can't be alone to work out big and complicated structure and buildings, they have to be molded into "organizations", to synchronize different expertise and sized up strength, then are capable of serving the society as a meaningful member of construction industry. 

To make them functional and contributive, organizations need to be given goals, compatible resource, and rules for participants accepting rewards and punishments as inducements. So, there must be leader, hierarchy, and systems in an organization; it means the engineers won't be immune from influence of power maneuver, which an innocent engineering debutant may hesitate to touch. 



However, in an organization where technology and experience are regarded as highly important, naked power manifested on the leader assigned not with assent of the members but through investment, heritance or tradition will have to share power with doyens of superior skill and knowledge. It's the same that commercial people will get their part of power apportioning when profitability is major concern. 

When the organizations become big and complicated, power from creeds and over opinions of public will be another origin. As a result, the leaders or candidates for them will be restrained for the power, and the organizations' behavior will have to be institutionalized. 

So, the entire system become more business-oriented at least in this part of capitalist world because we are sure that any organization, be public or private, shall perform according to the principle of utilitarianism that worth taxpayer, shareholders or expert's trust. 


-Power Distance 

Although it takes on different guises from person to person, there's possibility that the leaders may pursue and profit from enacting their own agenda using their naked and traditional power, and it won't be conflicting that the follow employees who gains nothing will be cooperative as they seem to gain vicariously from the superficial achievements of the leaders. 

It's fact that "genuinely cooperative enterprise" often appeared in Asian countries where "power distance" can be big between each layer of management and the young startups are always taught only to listen and learn. But the deliberation of power in an engineering organization will affect its benefit, loss, even survival. On the other hand, individuals always humbly don't like to touch non-technical issues and think by so they can be shielded from power manipulation of imperious person. 

So, people shall care about the leadership and history of organizations he wants to join and make judgement whether or not it's an organization worth fighting with.  

And it has to be noted, as organizations differ in size and type, common to them all is the tendency for inequality of power to increase as membership increases. It's a confusion to young people who may have justice and fraternity in mind and consider big company management rogue.

The general effect of an organization, is either to increase the well-being of persons, or to aid the survival of the organization itself, apart from those resulting from governmental self-preservation. 


b.     Managerial cadre: 

- Inflated Titles for Professionals 

A successful engineering company requires good balance between managers, professionals and occupational. But the balance could only be achieved when number and quality of the "man" employed matched operational requirement. 

Among all, loyalties to the company or the boss personally in an industry where small entrepreneurs are everywhere, are most important. It means steady employment that the "man" can be recruited and assigned to work places for required period under reasonable conditions. Qualification to fit the jobs is basic, and more than that, the hired must be trusted for many inter-person deeds taking places every day in construction industry. 

In Taiwan, there're 2,845 Class A Contractors, 1243 Class B Contractors, 7,057 Class C Contractors, and 547 Specialty Contractors toward the end of 2019. Also not a smaller number of Consulting Firms, Architects and independent PE Offices have been registered. That it means thousands post of which qualification levels equal to general managers, managers and senior engineers are wanted in the industry. The side effects under the circumstance can be that the construction companies or consultants cannot hire managers or engineers experienced enough for their positions; and people also don't have opportunities to learn management or technical skills in their career. 



Under the circumstance, market fragmentation is ensured as many small companies or institutions in the industry struggle for survival. But people still cherish their titles such as vice presidents or directors of the companies even the jobs require them to do works of more occupational content than professional ones. 

The situation further worsens when impatient authority tried to introduce project management system supposed compatible with international practice. The problem is unless there is an overhaul in construction related companies to stop the vicious cycle of professionalism tumbling, make it plain, the decimation of underperformed companies following the restructure of enduring ones should be required first to transform the disciplines, grade, and initiative of engineers, and then proceed to neat, clean and efficient 21st century construction 


-Professional and Occupational 

People working in the industry understand the difference between Professional and Occupational is whether or not they’ll use brain all the time. However, they must be aware a professional can easily and unconsciously become an occupational. The situation may include they practicing routine and unchallenged work too long, or simply losing the brain power to reason and to judge. 

Always the changes in the market or industry will bring in the impact, that people have to wary if their income are hardly raised or the employers explicitly ask for more training and test for the same job they’ve carried out. 

c.     Project-based or Department-oriented(functional) Management: 

- Diploma Over-Trump Proficiency

Conventionally, general public always considers diploma is equal to people's ability and it compels the authority to accept the idea that expertise can be tested through examination. So, for convenience the project owner and the party responsible for supervision wouldn’t look into the true curriculum of job candidate. The outcome that bureaucrats waive their power to judge the adequacy of proposed project staff, is that they have to use all the tools and weapon to safeguard the quality and progress of the works, but in vain. 


-Company’s Shrived HQ 

Only a few companies in Taiwan have fortune to expand their organization into big, and sophisticated matrix structure, in which both project-based and functional department-oriented management co-existed and support each other. 

As we’ve shown above, many entrepreneur-led companies with limited business volume have to adopt project-based management, of which, the practice is to assign people to site offices meeting minimum of client's requirement. The project offices are presumed to gain technical and management backup from knowledgeable engineers in each functional department, however, it couldn't be done as fierce competition to get the tender has hallowed head offices, we saw the veterans disappeared over time. 

Consequently, people are reduced only to work on projects of which the design and construction are general and routine because they don't hold engineers capable of developing know-hows of projects. But in reality, the companies have to establish for the project something similar to matrix organization to furnish the required support provided by both project-base and functional department-oriented system. 


d.     Personal and organizational behaviors: 

- Company Culture related to Size

 Personal behaviors are different from person to person, also in different time for the same person. When an organization is formed, it behaves as a person but like persons it will have different faces overtime. It depends on the leaders very much; especially the way he handles coordination and communication.

Organization mainly consist of engineers and ruled by them can be stiff and fastidious in giving orders and executing them. The reason and the result maybe it need to avoid mistakes and at the same time push things forward. But people with more liberal or creative thought may not appreciate and can be shut put; not good to business development and technological innovation. To mitigate that, a motley style of coordination and communication in a big company is highly valued.


- High and Low Context Cultures 

When organization is small, cultures can be defined as "high context”, more inclined toward relational and collectivist. Message can be spread effectively aiding by gestures, relations, body language, verbal messages, or non-verbal messages between individuals.

But when organization grow big, communication shall be more explicit, direct, and elaborate; because under the circumstance the individuals are not expected to have knowledge of each other's histories or background, and communication can't be shaped by long-standing relationships between speakers, they depend more on the words being spoken rather than on the interpretation of more subtle or unspoken cues. In such case, the organizations need low context culture.

"High" and "low" context cultures typically refer to language groups, nationalities, or regional communities. However, they have also been applied to corporations, professions and other cultural groups. Though not all individuals in a culture can be defined by cultural stereotypes, it can roughly classify: 

* When we're in elementary school, classmates and teacher fixed in the same classroom all day will know more each other, it's high context; and in university, people come and go, with professors and classmates the communication is made in lower context. 

* In smallest companies, boss know every employee, give orders and evaluate performance themselves, it's high context; in big companies, departments and levels are many, between them the communication needs to be made in meetings with minutes or written mails, power must be delegated and the bosses reduced to figurehead. 

* The lawyers and accountants talk and writes to identify the truth must be precise in words and numbers, they're of the lower context; the engineers and businessman next, while the farmers deal with the same lands and climates for life can be higher context. 

* In nations or societies where harmony and the well-being of the group is preferred over individual achievement, higher context cultures can be more prevailing in Asian countries, that many of them subsistent on peasantry economy historically. While European and North American countries long developed their industry, the culture can be lower context. 

People grow up in different context of culture will have distinct response toward the organization which he is hired; however, he can judge how or whether he has to change himself in behavior if he knows more about the cultural group the organization belong to; people will have flexibility for change when he is young. 


e.     Labor laws, quality, incentives, unions  

- Labor and Taxation Laws in Taiwan 

Working at site as construction people or supervisors will have to follow the weather instead of the calendar for their agenda. There's considerable improvement for employees on the aspect as labor law and regulation interfere; but the employer especially the big companies may not be able to observe to the law completely. It's also one of the reasons that sub-contractors and work gangs are introduced to the project for execution as they may be more "flexible' to follow the law. 

More than law abiding for overtime assignment, smaller company in Taiwan can pay corporation tax in deemed amount in exchange of lax scrutiny into their books. It means sometimes they can neglect or under report their employees' personal tax, retire fund or health care premium. And beyond monetary obligation evaded, they can be freer to recruit employees especially for blue collar people that many of them illegal foreign labors. 

A well-organized company in construction industry will consider laws amended in favor of employees are draconian, and tend to be meticulous toward recruitment even for white collar professionals. So, when construction or design companies have to rely on dispatched people to fulfill minimum contract requirement, they actually leave the responsibility to lay off people to manpower dispatch agencies; which is big departure to the professionalism. 


 - Taiwan’s Scrupulous Professionals 

in Taiwan, professionals also have their problem to learn things needed to develop their expertise. People are lack of patience in pursuance of knowledge and expertise for professionalism. They’re easy to accept jobs satisfying their temporary quest of titles and income and thus demand conditions more related to income, welfare and places of their work. Some of them may need to share with spouse for family chores and tend to work on regular hours. 

We learn that the professionals are working with their brain and are hardly quit the job for entire 24 hours a day. It means if they can cut clean with the work after office hour, they’re not better than any occupational for engineering solution at all. 

There could be a compromise likely to be reached with an irresponsible employer to sacrifice the work quality, but, and it opens the chance for those don’t have formal engineering background to fill the vacancy; thus, a degradation of professionalism. 

Yes, it’s an industry where toil and sweat sometimes still overwhelm the brain leaving rooms for those who don’t embrace professionalism. But the projects continue to demand certificated and licensed engineers, then people who have received engineering education may have potential and chances to claim back their dominance in the realm